SMLLC will not provide owner SSN/EIN - Backup Withholding?

Technical topics regarding tax preparation.
#1
kfried  
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There are many conflicting opinions and comments on the WWW. I have a client whose vendor is a SMLLC owned by an individual. The original W-9 they received simply had LLC name on Line 1, checked the box for sole-prop/single member LLC and provided EIN for LLC (which if you TIN match goes through).

Based on the instructions for Form W-9 the IRS has clearly stated "Do not enter the disregarded entity's EIN." Client approached vendor and requested updated W-9 and sent section of instructions highlighting how the form should be filled out per the instructions. Vendor resubmitted with Owner name on Line 1, LLC name on Line 2, and EIN for LLC. Name on Line 1 does not TIN match with EIN (obviously). Vendor refuses to provide SSN and their accountant has told them not to and they are not willing to get EIN for owner either.

Per W-9 instructions Client should back-up withhold, and has asked for help, however I have never had a vendor not comply with providing requested information. Do they backup withhold and remit using EIN of LLC as that is all they have? Any help is greatly appreciated.
 

#2
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Assuming vendor knows your going to withhold. Why don't you just tell them that if they would like ot provide SS# it will be easier for them to claim the withholding on their individual return. If not just provide the withholding to the IRS in reference to their name indicating SS# is unkown.
 

#3
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If you're wondering how to indicate SS# unknown, i don't have an answer, just leave it blank.
 

#4
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To be honest, I would probably let it go until there is a matching notice from the IRS (and convey such to vendor). To me, a single member LLC is essentially the same as a sole proprietorship. The schedule C is usually filed with a dba name and an EIN with no problem. I'm thinking as long as the 1099 shows the individual's name, the LLC name, and the EIN, there may not be a problem.

Per the 1099 instructions:
Sole proprietors. You must show the individual's
name on the first name line; on the second name line, you
may enter the “doing business as (DBA)” name. You may
not enter only the DBA name. For the TIN, enter either the
individual's SSN or the EIN of the business (sole
proprietorship). The IRS prefers that you enter the SSN.
Limited liability company (LLC). For a
single-member LLC (including a foreign LLC with a U.S.
owner) that is disregarded as an entity separate from its
owner under Regulations section 301.7701-3, enter the
owner's name only on the first name line and the LLC's
name on the second name line. For the TIN, enter the
owner's SSN (or EIN, if applicable). If the LLC is taxed as
a corporation, partnership, etc., enter the entity's EIN.
 

#5
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I think the concern on the IRS's part is that a disregarded entity doesn't always show up 100% on Schedule C or even at all on Schedule C (e.g. a SMLLC that holds rental real estate).

Not having the individual's SSN on the 1099 could create a real headache for them in that situation.

However -- I do admire your practicality.
 

#6
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Given their reluctance to provide proper information
I might be compelled to withhold and submit a 1099 with the EIN.
That'll be a real headache on their end.
~Captcook
 

#7
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ManVsTax, agree with you there. I was just assuming it was a Schedule C (my mistake). If it is something other than that, I would withhold.
 

#8
jon  
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Do not write a check or engage the vendor until a proper W-9 is received. After the fact getting the information can be hard to get as you have found out.
 

#9
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The ability of a sole proprietor to use either his/her SSN or EIN on the W-9 does call into question why a SMLLC that's disregarded is different.

Is a sole proprietor only one that operates a Sch C trade or business? Couldn't a sole proprietor run a rental real estate trade or business?
 

#10
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Well this is what I found on the IRS website under sole proprietor:
A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.

I would assume that if you consider the rental to be a trade or business, then you would be considered a sole proprietor of a rental business.
 

#11
taxcpa  
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For a real world example, I have several business clients that send me 1099s. All use my EIN, as that is what I provided. I do not have an LLC and file a schedule C. Never had a notice to either a client or me.
 

#12
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taxcpa wrote:For a real world example, I have several business clients that send me 1099s. All use my EIN, as that is what I provided. I do not have an LLC and file a schedule C. Never had a notice to either a client or me.


Yeah...you're organized as a sole proprietorship and are allowed to use your EIN on the W-9 as laid out in post #9 #4.

It's disregarded SMLLCs owned by individuals that are the issue.
 

#13
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If taxcpa, who already has an EIN, decides to now operate thru a disregarded LLC, is a second EIN required? If yes, which EIN would be shown on Schedule C?
 

#14
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dellpaul wrote:If taxcpa, who already has an EIN, decides to now operate thru a disregarded LLC, is a second EIN required? If yes, which EIN would be shown on Schedule C?


A SMLLC that is a disregarded entity is not required to obtain an EIN for federal income tax purposes.
 

#15
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An important question is who are the checks made out to.
 

#16
kfried  
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ManVsTax wrote:A SMLLC that is a disregarded entity is not required to obtain an EIN for federal income tax purposes.

Agreed, however if that LLC added a few employees or if their bank required the LLC to have an EIN to open an account, now they would have to obtain an EIN, which is where all of the confusion starts to set in.

So this morning I called our friends at the IRS because having never encountered this before why not seek out the ones that publish the forms right :roll: So Form W-9 (p.4) Part I 3rd paragraph, it clearly states:
"If you are a single-member LLC that is disregarded as an entity separate from its owner, enter the owner's SSN (or EIN, if the owner has one.) Do not enter the disregarded entity's EIN."

So I laid out the situation to the agent said I assisted client with TIN match which comes back as "Does Not Match" when I use EIN provided (LLC's EIN) and individual owners name. Agent tells me I that I must have entered something wrong. Told her, no the EIN is for the disregarded LLC entity not the owner. She proceeds to tell me that there cannot be a disregarded entity as it is not owned by a corporation. Really? Told me if they marked "Sole Proprietor/Single Member LLC" and gave me an EIN it would match with owner. Again stated that TIN Matching says otherwise. Asked how I should advise about backup withholding seeing instructions in Pub 1281 state if number is missing/incorrect to immediately withhold, to which she responded that the EIN was fine and I was over complicating things. Questioned on why the instructions for Form W-9 then clearly state NOT to use LLC EIN, again said owner was not a corp so LLC wouldn't have an EIN. Questioned her training and asked to speak to a manager, to which she requested I refrain from using my tone, which honestly was calm and subdued, we repeated this two more time before she then hung up on me. Here in lies the problem, we have documents that say one thing and the people who are suppose to assist taxpayer with questions don't even know what they are talking about.
 

#17
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If you are making the checks out to the smllc then I would use the smllc ein. If you make the checks out to individual you'll need their SS# or withhold. Hope that helps.
 

#18
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I think the instructions are confusing. Page 4 seems to say one thing, and page 5 another. On page 5 if you look under whose name and number is to be reported, for a sole proprietor & single member LLC it states to give the individual's social security number, but has a footnote which states:

You must show your individual name and you may also enter your business or DBA name on the “Business name/disregarded entity” name line. You may use either your SSN or EIN (if you have one), but the IRS encourages you to use your SSN.
 

#19
HowardS  
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The LLC's EIN and the individual's EIN are not the same. Follow Terry's advice.
Retired, no salvage value.
 

#20
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Regarding post #18 by Seaside, I've also been examining this recently.

The instructions on page 5 of the W-9 do suggest a SMLLC owned by an individual may use the LLC's EIN on the W-9, however the SSN of the individual is encouraged.

This is in conflict with the instructions on page 4, which explicitly state that a SMLLC owned by an individual should use the individual's SSN and not the LLC's EIN.
 

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